In the Netherlands, as elsewhere, the trustee model has come under intense scrutiny after the credit crisis. Dutch pension funds lost €120bn in 2008, €20bn of which can be chalked up to poor execution, the so-called ‘implementation shortfall'. Studies have found that trustee boards often lack the knowledge and expertise to fully understand and manage the risks of investment instruments and their execution.

You might expect these findings to trigger a surge in implemented consulting or fiduciary management. But in the Netherlands, where fiduciary management was invented and where over 60% of pension assets are now managed in fiduciary mandates, the model has been viewed as part of the problem, rather than the solution.

Quite a few pension funds discovered during the crisis that fiduciary management didn't safeguard their scheme from losses.

Meanwhile, the supervisor, DNB, expressed concern that pension funds had become overly reliant on external providers, reminding them that, by law, fiduciary responsibilities cannot be delegated and the board has to ‘be in control' at all times. Ever since, DNB has been calling on pension funds to bolster their governance, set up independent risk management, rein in freewheeling mandates and provide sufficient ‘countervailing power' to keep external providers in check.

Over the past few years, this has led to a sea change. With nearly two thirds of pension assets managed in fiduciary mandates, pension funds and fiduciary managers remain joined at the hip, but control has become a major issue.

Today pension funds are investing heavily in trustee education, the frequency of board meetings has doubled and the average time spent on pension fund business for trustees is now estimated at 1 to 1.5 days a week. Schemes have also begun appointing professionals to their boards, a trend which seems likely to accelerate once new legislation allowing wholly professional boards takes effect. Loosely formulated mandates have been tightened. Fiduciary managers are monitored much more closely.

Fiduciary managers are responding by expanding their trustee support services to better educate and inform their clients, by shoring up their own risk management capabilities and by modernising their governance, erecting Chinese walls between their asset management and strategic consulting teams.

It is clear that the quest to improve governance of the investment chain is far from over, particularly as the industry is gearing up for a sweeping overhaul of the Dutch pensions system.